Spend Matters welcomes another guest post from Abinaya Govindarajan of GEP.
A little bit of knowledge about procurement goes a long way. My past experiences with procurement have made me a better shopper, and this Black Friday I became CPO.
Requirement Gathering/Demand Planning: I started off by identifying the items that I needed to buy. I had to call my family and friends to find out things they needed and I aggregated the demand. There were some items that were either not in budget or weren’t necessary. I classified the potential spend into different buckets or categories – electronic accessories, computers and tablets, apparel and clothing, etc. In hindsight, I had actually performed a needs analysis and rationalized my purchase.
Supply Market Analysis: For each of the identified buckets, I had to find a list of suppliers and qualify them. I identified who offered the most competitive pricing on each of the categories prior to the sale day. I had to assess the quality of the products, delivery time, and delivery efficiencies from customer reviews. I read articles from previous year sales on how the trends were and looked at past data to create my hypothesis. I spoke to my friends (“Industry Experts”) who gave me valuable advice on how to be wary of fake products and deceptively low prices. By the end of this process, I had my supplier portfolio ready.
Sourcing Strategy: I evaluated various parameters before formulating my purchasing strategy.
- Online vs. In-store: These were the two buying options for me. Buying in-store meant standing in long lines and purchasing online meant risk of quality. Both came with their pros and cons. I evaluated price differences, effort required, and associated risks. Based on this, I identified items that to be purchased online and the ones to be purchased “in-store."
- India vs. US: This was another important decision. Since I was buying items for my family back home, it was imperative to check if buying in the US is cost-effective after all. There were some electronic products that weren’t available yet in India which I had to buy. There were some that didn’t have any significant price difference (which would be nullified if I had to pay import taxes in the airport). I looked at online retailers in India and made a few calls to the stores to get price points.
- Bundling products:
- There were deals where if I bought more, I could save more. I looked at my demand portfolio and identified if I could bundle any of these items. This meant re-adjusting my shopping list – different brand names, alternate products, etc.
- Total Cost Analysis: I realized that there were retailers that offered substantially lower prices compared to others, and upon reading in detail, they conveniently avoided the complementary products (for example, a charger and case to a tablet). So I constructed my cost model to identify the list of associated products and their individual costs to make purchasing decisions.
Monitor Market: Right after Black Friday was Cyber Monday. I had to monitor the market to find further drop in prices and evaluate if it was worth it to ship the product back to buy the same at a lower price. I am still evaluating the prices on the websites to see if the discounts are worth it!
Strategic sourcing could be the study of human mind after all. I agree that this exercise isn’t as rigorous or complex as buying professional services for a large organization, but every shopper wants to buy from the right place, at the right time and at the right price. Strategic sourcing helps them do just that – for purchases big or small.
For more interesting thinking on procurement, visit the GEP Knowledge Portal.